Financial Supermarket

A financial supermarket is a financial institution or company that offers a wide range of financial services under one roof. Financial supermarkets provide services that typically include banking, stock brokerage and insurance, and occasionally real-estate brokerage. The basic rationale behind the financial supermarket concept is to generate more fees per client and foster customer loyalty.

Financial supermarkets were trendy in the 1980s and 1990s although some legal barriers inhibited combinations of certain services. However, in 1999 the passage of the Gramm-Leach-Bliley Act removed the last significant obstacle. The Gramm-Leach Bliley Act repealed the Glass-Steagall Act of 1933, which prevented commercial banks from offering financial services, like investments and insurance-related services.

While financial supermarkets may offer convenience and efficiency to some customers, they have not become dominant players in the financial services industry for a number of reasons. First, increasing government regulation in the wake of the 2008 global credit crunch could continue to make some merger attempts in the financial industry challenging. Secondly, price-conscious customers are likely to shop around for the best deal – whether it is the lowest interest rate on a mortgage or the least amount of commissions charged for stock transactions – rather than pay a premium price for the sake of convenience.

In addition, recent scandals in retail banking, such as Wells Fargo’s signing up consumers for services they did not agree to buy, have lead many consumers to spread out their financial services shopping to mitigate risk. Finally, many believe the the increased shift to online banking and a range of internet-based financial services could give rise to more virtual financial supermarkets instead of physical ones.

Traditionally, a commercial bank will provide checking account services, loans for growing businesses, individuals and mortgages, and offer basic financial products like certificates of deposit (CDs) and savings accounts. A financial supermarket, however, could offer individuals the option to purchase insurance products, as well. For example, an individual looking to purchase life insurance might be able to inquire about the options while depositing a check – such as term, permanent, whole, universal, variable and more.

While many consumers have not historically seen the value in a financial supermarket, new opportunities are arising for individuals to manage their financial activities on a common web-based or mobile platform. Many financial technology or fintech companies have begun to integrate their services with larger banking institutions for a larger array of customer offerings.